However, there is a more direct way to gain from the opening of Terminal 4. Furthermore, recent fall of prices is incongruent with the positive data coming out of Changi Airport.

Gateway services

In 1Q18, SATS gateway services gained 5.1% year on year (YoY), which was largely contributed by a rise in flight movements and cargo throughput at Changi Airport.

Higher margins from its gateway services have also led to a higher operating profit.

With Singapore’s gateway services accounting for an approximate 94% of the segment’s revenue, it is highly correlated to flights and cargos that were handled at Changi Airport.

By projection, 2Q18 is likely to show strong gateway services revenue. Supporting this, positive data was seen for two out of the three months in 2Q18 as flight movements increased by 4.3% and cargo throughput grew 11%.

In addition, the opening of Changi Airport Terminal 4 will bring in more revenue for SATS from the increase in gateway services.

Weakened by poor in-flight catering pricing?

Since FY2014, the pricing for SATS inflight catering has been slipping. But UOB Kay Hian Research (UOBKH) believes that the street had factored in the weakening pricing based on the current stock price.

Aggressive competition between Dnata and SATS and the margin pressure faced by airlines were the two main attributes for the poor performing segment.

However, there is a potential catalyst for the in-flight catering segment that might improve its performance through higher volume.

Norwegian Air has announced its intention to enter the Singapore market and Qantas has decided to shift its base back to Singapore.

Aside from the additional demand for in-flight catering, SATS may stand to gain from providing lounge catering for Qantas.

Bigger, better and stronger

Being 6 times larger than Dnata, SATS has the scalable advantage against its competitor when they engage in a pricing war. To quantify it, SATS handles 144,000 flights against Dnata’s 40,000.